Condo hotels are one of the most exciting real estate market segments. Every year, another big brand like Trump, Shangri-La, or Ritz Carlton is developing a new condo hotel in a major resort or urban destination. This includes Canadian cities such as Vancouver (Marriott and Shangri-La) and Toronto (Trump, Shangri-La, and The Cosmopolitan).
A condo hotel operates just like any hotel you might be familiar with. The only difference is that each room is individually owned. The paying hotel guest would have no idea that the hotel is a condo hotel. For appearance’s sake, there is no difference.
As an owner, you take a simple title. So, you own it outright. Just like you would own the home you currently reside in. The difference is that you would have a highly skilled management team overseeing your property and handling all daily operations and rental aspects. Condo hotels are designed for 100% hassle-free ownership.
Of course, as an owner of the condo hotel, your visit would likely entitle you to many benefits and first-in-line privileges not made available to the average guest. You would be entitled to a truly remarkable visit.
Some have suggested that condo hotels are the best area of real estate to get involved with, short of commercial development. To back up this statement, they point to hard evidence that is readily available – historical appreciation comparisons. It’s not uncommon to find the property values of branded condo hotels appreciating at a greater rate than traditional real estate in the same market.
One of the few downsides to owning a condo hotel is that most are not meant for residency. Many condo hotels have usage restrictions that limit you to a couple of months of total usage throughout the year. With that said, most people do not buy condo hotels with the idea of residency, so this restriction rarely affects any potential buyer. Another downside is the limited buyer pool when you sell your condo hotel. The demand for such property is more limited compared to other residential properties.
When purchasing a condo hotel, it is essential to look at it from an investment point of view, given the usage restrictions. You should examine financial statements, occupancy rates, management fees, etc.
